John Fredriksen-controlled SFL Corp has been awarded $27.4m in damages after a UK-based liner shipping newcomer reneged on a charter during the pandemic.
Allseas Global Management Ltd (AGML) was the guarantor of the 1,740-teu container ship Green Ace (built 2005) when its charterer defaulted in mid-2022, according to a High Court in London ruling on Tuesday.
The hefty sum is based on losses arising from the repudiation of the charter and what SFL earned by refixing the vessel.
SFL brought the claim for debt and damages alleging the repudiation of a charter agreed on 30 May 2022.
Allseas Global Project Logistics, which was 50% owned by AGML, had agreed to charter the Green Ace for 20 to 24 months.
The charter was signed in May 2022 at the elevated pandemic rate of $59,500 per day.
Allseas proposed to negotiate the charter in mid-August 2022 as freight rates collapsed, but SFL did not respond, according to court documents.
Chunky losses
AGML sought to argue that it never agreed to guarantee the charterers’ performance of the contract.
Yet email exchanges showed there was “a binding guarantee contained in or evidenced by recap emails”, noted Judge Christopher Hancock KC.
The emails were evidence of a guarantee by AGML, as opposed to a charter, he added.
Had the charter not been repudiated, SFL would have earned $37.25m for the period stretching from 25 August 2022 to 22 April 2024.
Instead, the vessel was relet in a weaker market and made charter earnings of only $9m.
The charterers also failed to pay the hire before the termination of the agreement amounting to $229,494.
That pushed up total losses to a total of $27.4m.
The court agreed that SFL had looked to charter out the vessel to the highest achievable rate to mitigate losses.
SFL had engaged Clarksons — which fixed the Green Ace — and Maersk Broker (now MB Shipbrokers) to find alternative employment.
The upshot was that, between September 2022 and May 2023, SFL entered into four successive replacement time charters.
These did not compensate for the amount that the owners had originally anticipated.
Salutary lesson
Court documents list UK-based freight forwarder Allseas as largely owned and controlled by Darren Wright.
The company had sought to set up its own liner operation when freight rates boomed during the pandemic but was left with expensive tonnage when rates collapsed.
The Green Ace was delivered on 22 August 2022 with over $1m already owing due for 15 days’ charter hire, according to court documents.
That was despite a binding guarantee as evidenced in the exchange of emails on 30 May 2022, the judgment noted.
Emails sent by Allseas in August 2022 were “repudiatory, or renunciatory”, it added.
Judge Hancock ruled that it entitled SFL to recover $27.4m in losses from AGML.
Allseas was one of several newcomers that entered the container shipping market in late 2021 and 2022.
At that time, customers were desperate for tonnage and boxes and Allseas took on ships to serve them.
What was to have been a one-off run from Taicang in China to the UK ended up with several vessels being taken for the market for regular services.
